You might consider house hacking a small multifamily (2-4 units) for your next home.

Looking at the homes on the market, prices vary wildly from $~200-$400+/sqft and it doesn't seem to correspond to just the quality of the house.

He has even come to my personal house to pick up money and some things I ordered from Amazon to be installed in the property, and fronted some of his own money to keep things moving while I wait for the draw from my lender to clear.

He wants me to call him tomorrow to set up an appointment to see the house.

If you'll be living in the house and renting it from your parents that is fine for a 1031 replacement (make sure it's an arms length transaction of course). 

Right now, almost all development is done by foreign investors.

Say I pay cash for a house or put down 30k?

The plan is to renovate it and create affordable housing, possibly section 8 only.

If you're new to the investment strategy of house hacking, read "The House Hacking Strategy" by Craig Curelop.

My friend has seen and had horror stories - it's the same in any affordable housing market.